UPDATE 2-Marubeni nears $5 bln-plus Gavilon deal -sources

May 28, 2012|Reuters

* Takeover announcement could come on Tuesday

* Marubeni, Gavilon have been in talks since early May

* Gavilon's owners include George Soros

By Emi Emoto and Soyoung Kim

TOKYO/NEW YORK, May 28 (Reuters) - Japanese trading houseMarubeni Corp is nearing a deal to buy U.S. grainsmerchant Gavilon for more than $5 billion including debt andcould announce the transaction as early as Tuesday afternoon inTokyo, according to people familiar with the matter.

Marubeni, Japan's fifth-largest trading company, has been inadvanced talks to buy Gavilon since early May. The Japanesecompany has confirmed its interest in Gavilon but said nodecision had been made.

Although the deal is pending final approval, the proposedterms value Gavilon at more than $5 billion including debt, andMarubeni has lined up financing for the deal, said the sources,who asked not to be named since the deal has not been announced.

A valuation at that level would be in line with the proposedterms the two sides have been discussing since early this month.People familiar with the matter told Reuters previously thatMarubeni has offered to pay $5.2 billion for Gavilon, includingassuming some $1.7 billion of debt the U.S. grain trader had atthe end of December.

Representatives of Marubeni and Gavilon could notimmediately be reached for comment.

Marubeni had earlier dispatched a team of auditors toGavilon's Omaha, Nebraska, headquarters to review its operationsand finances, sources have said.

In addition, Marubeni President Teruo Asada traveled to NewYork last week with other executives as discussion of the dealreached the final stages, a person familiar with the trip said.

Acquiring Gavilon would deepen Marubeni's control of grainsupplies from North America, the world's top grain export hub.

He added: "Realizing that better supply-chain managementshould better prepare these importers in their global sourcingneeds."

A deal could also help Marubeni challenge Archer DanielsMidland as the biggest supplier of U.S. grains andoilseeds to China.

Gavilon now has about 320 million bushels of storage in theUnited States, ranking third behind ADM and Cargill Inc but ahead of global grain giants like Bunge Ltdand Louis Dreyfus.

Marubeni's acquisition of Gavilon is unlikely to face anypushback from farmers and agricultural business which have longbeen accustomed to the presence of Japanese grain companies inthe United States.

GOOD FIT

A combination of Marubeni and Gavilon is seen by analysts asa good commercial fit, marrying Gavilon's presence in theCentral Plains and Midwest with Marubeni's operations in thePacific Northwest - the shortest U.S. sea route to Asia.

Gavilon also has a large footprint in the U.S. fertilizermarket, an energy operation that includes 7 million barrels ofcrude oil storage and an oil, grain and ethanol trading unit.

Marubeni plans to announce the Gavilon deal as early asTuesday afternoon Japan time, sources said.

Morgan Stanley is advising Gavilon on the transaction, whileNomura is advising Marubeni, people involved in thediscussions have said.

Marubeni's rival trading houses Mitsui & Co andMitsubishi Corp had both been seen as potential biddersfor Gavilon but decided not to pursue a deal.

U.S. analysts say Marubeni's interest in Gavilon could bedriven by a desire to grab a bigger share of the lucrativebusiness of supplying grains to China, the world's top importerof soybeans and a fast-growing buyer of corn.

Marubeni is already the second-largest exporter of U.S.grains to China, with soybean shipments surging five-fold since2008, based on data from trade intelligence firm PIERS.

Marubeni handled nearly 20 percent of China's soybeanimports in 2010, according to its annual report.

Unlike Marubeni, Gavilon has not made deep inroads to China,having exported less than 10,000 tonnes of grains over the pasttwo years, data showed.

In 2010, Marubeni overtook Japan's national federation offarm cooperatives Zen-noh as the biggest Japanese exporter ofU.S. grains and oilseeds, according to PIERS data, and accountsfor more than a third of all shipments by Japan-based firms.

Marubeni, which bought a Portland, Oregon, export elevatorto improve its ability to supply Japan, is now eyeing increasedshipments to China. In 2009 it signed a letter of intent withSinograin, a Chinese state firm, to "work closely in comingyears" to build state reserves and commercial grain supplies.